Dealing With a Mineral Interest Not Administered as Part of Predeceased Owner’s Estate

You are interested in acquiring a gas lease on certain parcel. When you look at the real property records, however, you discover the record owner is deceased. Now what do you do? Who owns the interests? How do you evidence this ownership?

This issue might be best discussed in the context of an example. Roger Farmer sold his farm, located in Muskingum County, Ohio, in 1978 and retained the mineral interests. That is, Roger “severed” the mineral interest from the rest of the property. He died in 1995 without transferring those interests. He left a will, admitted to probate in Franklin County, Ohio, which left all his property, real and personal, to his son, John.

John died in 2002, also without transferring the interests. There is no record of any will being admitted to probate, or of the administration of his estate. To determine the current owners of the mineral interest, we have to analyze Roger’s will and John’s family situation.

Roger’s will is straightforward; he left his property to John. In reviewing the probate filings related to Roger’s estate, however, we discover that the mineral interest was not included in the probate court Inventory and no Certificate of Transfer (CT) was issued by the court or filed in the recorder’s office. A CT is the method used under Ohio law to evidence a transfer of an interest in real property at death.

Because the administration of Roger’s estate was completed without filing an application for a CT with respect to the mineral interest, an heir, devisee or successor in interest may file an application for a CT in the Franklin County Probate Court without reopening the estate administration. (ORC §2113.61(D)) This CT would show the transfer of the mineral interest to John under Roger’s will. After the court issues the CT, it would be recorded in Muskingum County. In addition, an authenticated copy of the will and the order of probate should be admitted to record in the Muskingum County Probate Court because the administration of Roger’s estate took place in another county. (ORC §2107.21)

Because John is deceased, the mineral interest also passed through his estate. We first need to determine whether and where John’s estate was administered, which may be difficult if we cannot discover where John was domiciled at death. Once we are confident (or as confident as we can be) that John did not leave a will and that no probate administration occurred, the procedure for handling John’s estate would be similar to his father’s. However, for John’s estate we also have to determine who is entitled to John’s estate, which could be difficult, depending on John’s family situation.

Ohio Revised Code §2105.06, the Ohio Statute of Descent and Distribution, governs the distribution of the property of decedents who die without a will; i.e., “intestate:” The current version of this statute dictates the following possible outcomes in this example:

If John left a wife and no children, or if all of John’s children were also children of his wife, the entire mineral interest would pass to the wife. (Note: Because ORC §2105.06 has been amended a number of times over the years, it is important to find the version of the statute in effect at John’s death.)

If John’s children were not all children of his wife, John’s wife would receive a fixed amount from the estate, either $20,000 or $60,000, and either a half or a third of the estate, depending on the number of John’s children who survived him.

If John did not leave a wife with children, or if a child predeceased him, the statute identifies other family members who may be entitled to receive property from John’s estate.

Once John’s family tree is sorted out, an heir or successor in interest may file an application for a CT in the county where John was domiciled at death. The CT in would be recorded in Muskingum County. Once again, there is no need to have a full probate administration of the property. This CT would show the interest passing to John’s heirs, as determined under ORC §2105.06.

Assuming all individuals named on the CT are still living, we would now have a record that reflects the actual ownership of the mineral interest. It is important to remember, however, that CT does not actually pass legal title. That title passes by law at the time of the decedent’s death. Therefore, if we do not correctly identify John’s heirs, we will not get the correct signatures on the deed when we buy the mineral interest. In the case of uncertainty, we may want to have an interested party file a Determination of Heirship action, which asks the probate court establish the identity of the heirs.

Now let’s change the facts. Up to now, we have assumed that John was domiciled in Ohio at the time of his death. Instead, assume that at the time of his death John was domiciled in Indiana and died intestate in Indiana? Further assume his estate was administered in Indiana and no proceedings occurred in Ohio. There are a couple of approaches to dealing with this situation.

First, if we can have a personal representative reappointed in Indiana, that personal representative can apply for a CT in Muskingum County showing the transfer to the appropriate heirs. We would apply Ohio, not Indiana, law in determining the heirs.

Alternatively, an interested person, such as one of John’s heirs, can apply for ancillary administration in Muskingum County, Ohio. Ancillary administration follows the same general procedures as a regular, domiciliary administration. The court would appoint an ancillary administrator who would be required to go through all of the usual steps to administer John’s estate including appraising the mineral interest, filing an Inventory, applying for and recording a CT, and filing a Final Accounting. (ORC §2129.04 et seq.)

One caveat: The Ohio Dormant Mineral Act (“ODMA”), generally, imposes a 20-year “use it or lose it” rule for severed mineral interests. Anyone who is considering buying a mineral interest that was ever severed from the surface estate should proceed with caution. In our example, Roger Farmer’s heirs’ claim to the minerals may have been extinguished by operation of law, or may be susceptible to a claim by the surface owners that the severed mineral title expired due to a 20-year period of inactivity under the current or previous version of the ODMA. Read more in this post about the Ohio Dorman Minerals Act.

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